Amazon Sued by FTC, 22 US States Over Ad Sales Practices

Amazon.com illegally raised prices for advertisers by surreptitiously raising the minimum price required to place ads that ‌promote their products, the U.S. Federal Trade Commission alleged in a lawsuit filed in federal court earlier this week.

The agency, joined by a bipartisan group of 22 U.S. states, said Amazon systematically inflated auction prices for advertisers without their knowledge, costing them $20 billion or more. "Amazon has been able to generate billions of dollars in profits — at the ​expense of its auction advertising customers," the FTC stated in its suit, filed in federal court in the Western District of ​Washington state.

Amazon, in a blog post Monday, denied wrongdoing, saying its advertising policies aim to show shoppers ​the most relevant ads, adding that the average cost per click for advertisers remained flat from 2019 to 2024, while the sales generated from those clicks rose.

Total Retail's Take: The FTC lawsuit poses a potentially significant threat to Amazon's high-margin advertising business, one of its most important profit engines. The FTC and 22 states allege that Amazon secretly manipulated its advertising auctions through undisclosed surcharges, resulting in more than 1 million brands and sellers paying higher prices and potentially generating tens of billions of dollars for Amazon. The complaint alleges that Amazon represented its auctions as essentially "second-price" auctions, while advertisers increasingly ended up paying their own winning bid. Amazon's counterargument is that advertisers make bidding decisions based on performance and that its system has actually saved advertisers money while improving results.

If the FTC prevails, Amazon could face restitution and penalties as well as changes to how its ad auctions operate, potentially reducing advertising revenue and/or margins. Perhaps more important is the risk to advertiser trust: Amazon's value proposition rests partly on merchants believing they're getting transparent access to high-intent shoppers. Questions about whether Amazon itself is influencing the price of that access could prompt brands to scrutinize their Amazon ad spending and demand greater transparency and independent measurement.

For the retail industry, the case underscores the increasingly complicated relationship between retailers and the brands selling and advertising on their platforms. Retail media has exploded because retailers possess valuable first-party purchase data and can connect advertising directly to transactions. However, the Amazon case highlights the potential conflicts that arise when the same company owns the marketplace, controls product discovery, operates the advertising platform, sets the auction rules, and measures advertising performance. These allegations could increase pressure across the retail media industry for clearer auction mechanics, pricing transparency and third-party measurement. Retailers building their own media networks should view this as a warning that maximizing short-term ad monetization at the expense of transparency can jeopardize the trust required to grow those businesses over the long term.

On the positive side, greater regulatory scrutiny could ultimately give advertisers more visibility and control over what they're paying for retail media and whether those investments are truly incremental. Brands may respond by demanding clearer pricing, auditing their marketplace advertising more aggressively, diversifying spending across RMNs, and evaluating performance based on profitability and incremental sales rather than simply Amazon-reported ROAS. This lawsuit could accelerate the retail media industry's maturation from a rapidly growing but relatively opaque advertising channel into one held to the same standards of transparency, measurement and accountability as other major forms of digital advertising.